How to Choose a Financial Advisor


  • Step 1

    Search for an advisor that you can trust. It's sad, but misplaced confidence is a primary cause of financial disaster for many investors. Of course, it's mostly preventable. Just as a leopard does not change its spots, persons with unsavory backgrounds tend to repeat. How does this translate? Consider no advisor on whom you've not obtained a) licensing and credentials and b) a clean record for disciplinary actions and lawsuits. We also recommend that you consider an advisor from a well know major brokerage firm.

  • Step 2

    Review the prospective analyst's experience. There's something about the passage of time that tends to shake out the unworthy. As an industry undergoes its normal ebbs and flows, those participants who cannot acclimate are separated out, either voluntarily or otherwise. And those are exactly the persons you do not want advising you. It's my belief that those with more experience should be considered, but do not shy away from newer advisors. Why? New advisors are often on a team with well experienced advisors, or they have relationships with senior advisors that they consult with. In most instances you will have decades of experience working for you with a newer advisor, plus the dedicated personal attention that they can offer. If choosing a newer advisor, be sure to ask who they are associated with.

  • Step 3

    Evaluate credentials. Although it adds credibility, recognize that a Certified Financial Planner (CFP) designation is not the be-all and end-all of an advisor's qualifications. Only single courses in Estate Planning, Income Tax Planning, and Investment Planning are required in the six-subject course of study and, as expected, the latter subject focuses only on the traditional securities market. What you really require in a counselor is diversity. My financial advisor's credentials include various university degrees and professional designations, with experience that includes tax return preparation with the national accounting firm of Touche Ross, real estate appraisal for the General Motors Corporation, service as a superior court Receiver, organization and operation of a private trust company, and has supervised his personal investments comprising a mix of real estate, corporate securities, and mortgage lending for more than three decades.

  • Step 4

    Favor a compatible investment pattern. As an ideal investment goal, let your counselor's personal portfolio of investments reflect your own. If it does not, you've chosen unwisely. Then keep regularly abreast of your advisor's financial activities so that you may, if you choose, mimic them.